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University of Tennessee Honors Thesis Projects

University of Tennessee Honors Program

5-2002

The Estee Lauder Companies Background and
History
Ashley Brooke Howerton
University of Tennessee - Knoxville

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Projects.
http://trace.tennessee.edu/utk_chanhonoproj/553

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Appendix E-

UNIVERSITY HONORS PROGRAM
SENIOR PROJECT - APPROVAL

College: -I!h~
Faculty Mentor:

Department: ~

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PROJECT TITLE:

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his completed senior honors thesis with this student and certify that it is a project
ith honors 1 el undergraduate research in this field.
Signed: -""jL_ _"-----==-~~'-C"L.:..--=~~~..-:------' Faculty Mentor
Date:

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General Assessment - please provide a short paragraph that highlights the most significant
features of the project.
Comments (Optional):

Brooke has done a gcxxl job of researching and analyzing the major business
theroos associated with Estee Lauder I s marketplace perfonnance. She merged
data from a variety of primary and secondary sources, and did a nice job
organizing and analyzing the data.
Brooke was a pleasure to work with, she responded well to my carments and feedback,
and she put in significant effort on this reIX>rt.

The Estee Lauder Companies
Background and History
by
Ashley.Brooke Howerton

Executive Summary

I selected the topic of "Estee Lauder Companies Background and History"
because I am thoroughly interested in the subject matter. I am a consultant for Clinique at
Proffitts Knoxville Center. I am interested in moving forward with the company and
developing a future with Clinique by making it a career.
Research on this topic has been extensive. I have gotten basic company
information, internal documents, company chronology, press releases, financial
institution information and of course first-hand knowledge. The researched information
came in most part from the Internet at various sites. The internal documents consist of
information sent to consultants worldwide. The financial information came from Morgan
Stanley.
I discovered in the research a great deal of knowledge about the Estee Lauder
Companies Inc. in which I was unaware of prior to the research. The five key subjects
'that I focused on were background and history, financial development, operational
strategies, brand equity and innovation/social responsibility. One key finding is the
number of companies in which the Estee Lauder Companies consist. The Company's

products are sold in over 120 countries and territories under well-recognized brand
names, including Estee Lauder, Aramis, Clinique, Prescriptives, Origins, MAC, La Mer,
Bobbi Brown, Tommy Hilfiger,jane, Donna Karan, Aveda, Stila, Jo Malone and Bumble
and bumble. I also discovered a large amount of research from Morgan Stanley about the
flllancial development of the company. The Company has posted a 23% compound
annual growth since 1996 and has completed about $800 million in acquisitions in recent

years. Also, Estee Lauder holds the number one position with a market share of at least

500/0 in the U.S. prestige beauty market, with a 550/0 share in makeup and skincare and
30% in fragrances.
I have thoroughly enjoyed researching this topic of choice. I learned a great deal
about the Estee Lauder Companies Inc. I feel confident that the company" will continue its
successfulness in the upcoming years. I look forward to continuing my career with them
in the future.

in 1964 . recently....
•
.
. fragrance and.
. was founded in 1979 . was launched with four products: Super Rich All Purpose
~
. and Skin Lotion .. was
introduced in 1990 . including Estee Lauder.. Tommy Hilfiger...
Company Timeline
The Company was founded in 1946 by Mrs.
.
.. makeup. Clinique.. The
.. Origins. dermatologist-guided...
. Bobbi Brown.. a line of high prestige fragrance and
grooming products for men.. followed in 1968 ..
.
.. La
Mer.
Following this launch was Aramis....
•
--. bath/body and
Sensory Therapy products that use age-old remedies from nature.
. Cleansing Oil. Jo Malone and
Bumble and bumble ..
.
..
Creme.. hair care products..
~
Company's products are sold in over 120 countries and territories under well-recognized
brand names.
.
Joseph Lauder.. a line of skin care....
.
~
... Creme Pack....
. the first allergy-tested.-... jane. fragrance free
"IIIJt
....Estee Lauder Companies Background and History
The Estee Lauder Companies is one of the world's leading manufacturers and
marketers of quality skin care. Estee Lauder and her husband.
.. Although the principal brand began with Estee Lauder the company
progressed to a great deal more ... Stila.
~
.. MAC.
. A veda.. Prescriptives...
•
Origins Natural Resources.. Donna Karan....
Prescriptives. a color authority with an advanced collection of highly
individualized products..
•
Clinique.
cosmetics brand..
. Aramis.
•
Estee Lauder.. makeup.
~
....

...
..
Financial Development
The Estee Lauder Companies hoped to accomplish diversity in the marketplace by
undertaking this dynamic strategy. a Los Angeles-
.. DKNY and Kate
Spade brands .
-.
.....
. Bobbi Brown was acquired
in 1995 .
.
a developer... Donna Karan New York...
In 2000..
Bumble and bumble....
•
In 1999.. the Company acquired a majority equity interest in New York-based
•
The Estee Lauder Companies is also the global licensee for fragrances and
cosmetics for the Tommy Hilfiger. prestige hair care
..
... marketer and distributor of quality hair care products ..
. According to Morgan Stanley this acquisition became
a success for the once meager cosmetics company.... a premier hair salon. the Company invented Sassaby...... Inc.... completing the acquisition in 1998....
....
MAC in 1994..
•
brand jane.. owner of the color cosmetics
industry.
~
...S..
.
. a leader ip the U..
..
..
~
•
....
based prestigious cosmetics company.. and Bumble and bumble products..
..2
•
In the 1990s the Company acquired two important makeup artist brands:
MAC and Bobbi Brown.... Inc.
marketer of prestige skin care and fragrance products.. Morgan Stanley calculates that the
company has posted a 230/0 compound annual growth since 1996 and has completed
about $800 million in acquisitions in recent years...
. and Jo Malone...
. Trade industry data have shown that
.
In 1997.
.
... the London-based
.... the Company then invented Stila Cosmetics.. The Company acquired a majority equity interest in
...... and Aveda Corporation.

and solid returns on assets. The Estee Lauder Companies shares' drop in 2001 has
been deeper in retreats by the company's global peers and the S & P 500-stock index. Morgan Stanley rates Estee Lauder Outperform. During this time the Americas region represented
61 % of net sales and 540/0 of operating income before restructuring and other
nonrecurring charges. The Company has recorded more than 45 years of
consecutive annual sales increases. and amortization for calendar 2002. in Morgan Stanley's view. aided by its strong portfolio of brands (7). or 630/0 of the financial corporations estimate of net income. and
travel retailing (13). a strong balance sheet. in terms of its relative
price-to-eamings multiple and their estimates of the ratio of the company's earnings
before interest.. Estee Lauder has
dominant market shares. It has increased its market share. taxes.7 million. depreciation.
partly through adjusted production ~ates and a gradual recovery expected in U. with nearterm EPS uncertainties linked to consumer spending.S.
J
Estee Lauder holds the number one position with a market share of at least 500/0 in the
U.. prestige beauty market. based on a weighted average of traditional
multiples and intrinsic valuation.6 billion and net earnings before the
cumulative effect of a change in accounting principle and before restructuring and other
one-time charges were $347.
For fiscal year 2001. which they calculate to be a fair value.S. Yet
Estee Lauder is statistically attractive. Estee Lauder has
-
indicated that excess inventories should be eliminated by the third quarter of fiscal 2002. with a $37 price
target. Morgan Stanley forecasts Estee Lauder will generate free cash flow
of $222 million. net sales were $4. Morgan Stanley believes possible
elimination of excess inventories soon could be a catalyst for the stock. slightly less
. with a 550/0 share in makeup and skincare and 300/0 in
fragrances.

. low debt.. and a low capital-spending business.
point in the quarter... While
growth has been stymied.
and they project interest coverage and return on net assets that would exceed the
free cash flow.
travel....S. The lower expectations are primarily due to the significant inventory contraction
~
by U...
..
in their view ..
--.. Morgan Stanley believes that Estee Lauder is underleveraged....
. With a 460/0 share in the U.4
.. With its outsize returns.
company's weighted average cost of capital.....S.
~
. In addition...
..
..... Estee Lauder has become a market
..
.
....
--
. retailers and softness
at travel retail.33.15 (versus $ L20 previously).
. They also reduced their F2002 EPS ending June
to $1.. 2001.
--
"lIP
. Despite erosion of economic conditions and consumer sentiment..
.
--
. The Estee Lauder Companies Inc . strong
. consumer take away of the Company's products has outpaced sell-in
by approximately 50/0 in the U. This unexpected drop lowered consumer confidence..
announced it is revising downward its net sales and net earnings expectations for its fiscal
2002 second quarter..... Morgan Stanley thinks Estee Lauder needs to do a better job retrenching
and restricting capital.. retailers...S. the Company's freestanding retail stores
continue to generate strong results (9).
Morgan Stanley Research Update
In a recent Morgan Stanley research update on January 30.. reflecting inventory contraction by U....--
..
Press Release
In a recent press release on December 19. at this
~
.
....S.. Their initial point estimate for F2003 is $1.--
--
~
. Estee Lauder was
downgraded to neutral from outperform..... spending and
.
than the sector average. the company
s~ould
be able to
accumulate a lot of cash to make further strategic acquisitions and repurchase its shares.

leader.5
..
The shares are trading at 25 times C2002 PIE versus 24 times for the global peer group ..
. In the last 12 months...
... Still.. Morgan Stanley sees 12-month fair
value of $33.
...
..lently more capital intensive.
The company recommended Estee Lauder in 1999 because they believed Estee Lauder
--
was in the early innings of its development as a prestige cosmetics company. Although the stock has rebounded off its December low... its ROrC is
F1997... Morgan Stanley forecasts asset turns to decline to lAx in F2002 from 2......
.
.
industry demand is slowing... That said.
.
--
...
.. Morgan Stanley believes the
current valuation does not reflect Estee Lauder's deteriorating business fundamentals .
.
Lauder's competition position is good and getting better.. for return on net operating assets of 17-18% versus 320/0 in 1997....0x in
.... Morgan Stanley believes this is a stock
the market will likely come back to..
Based on a weighted average of traditional multiples.
.. it
. below its current price...
...1 % a year ago and all while
.. in their view. Returns will
likely be hampered by working capital inefficiencies and a business model that is
becoming more retail-oriented. and conseql. particularly if the company does a good job of
retrenching and restricting capitaL Estee Lauder's market shares at Makeup and Skincare
..
.. and Morgan Stanley has little doubt that two to three years from now the company
will remain a dominant player in the industry (13) .
.
.
has not done well.
the S & P 500 and up 6% for the global peer universe....
"W
..
Morgan Stanley's sector investment approach has been to try to identify
undervalued companies that will likely generate improving return on net operating assets .
..
.
.5%) from 12... While Estee
.
declining.... the shares are down 21 % versus down 20% for
.. Morgan Stanley
expects operating margins to decline to 10.."
.
~
.....
....
..
.

-
. followed by Skincare.
Downgrade
..
revenues...6
are still strong.
~
14%) to reflect higher-than-expected marketing investments in the second half ofF2002
to bolster revenue growth... the balance sheet is rock solid and travel retail could certainly become
more cooperative (13)...
.. Returns are still under pressure ... The primary reasons for the downgrade are
the following:
1...
.
.
partly offset by increased minority interests. Makeup.. Over the past few years... while
.000 to $1 million in the first year of operation... as a result of lower department store and travel retail
.
...... MAC and Origins
brands..
Fragrance should decline 10%.. Earnings should be helped by a lower tax rate and reduced interest expenses.. Estee Lauder has been
actively opening new free-standing stores under the Aveda.
..".. while sales should remain virtually flat hit by
contiriw~g weakness in travel retail.
This should be driven by Asia Pacific.
Haircare should be the fastest growing division.... The opening of new standing store
requires a capital investment of $350-400 million and sales usually reach
$750.. Morgan Stanley forecasts F2002 sales to be flat to down 1% .
Morgan Stanley has lowered their F2002 EPS forecast by $0.Estee Lauder's return on invested capital has
been trending down over the past five years and they forecast ROlC to fall
340/bps to 17. and Americas should decline 1-20/0.
.. The company now owns 340 stores and intends to open another 60160 doors within the next couple of years.
.60/0 in F2002... Once again..15 (down
..05 to $1. After two to three years
.

The
slowdown was triggered by the U. Deteriorating profitability
Due to the before mentioned F2002 operating
margins to 10. on average.
3. recession and compounded by September
11 th events. Estee Lauder management could be
more proactive with cost cutting. Morgan Stanley calculated that a decrease of overhead
expenses to the sector average level. and internationally (4). they must focus on
quality and innovation.
2.1 % a year ago.not cannibalize . they must have the potential for global development and they
must have the potential for long-term growth both in the U. profitability ramps up to 150/0. Sluggish industry growth .7
of business.S.50/0 from 12.00 on earnings.its existing brands. There is significant potential for overhead
cost improvement.
Growth Strategies
One of the ways the Company is growing is by acquiring companies that make
sense to the organization. Estee Lauder projects long-term earnings growth
at 7 -90/0 annually and has an EBIT margin target of 150/0.While Estee Lauder fared somewhat better than
the market in 2001. as strong volume gro~h
more than offsets start-up costs. Department stores declined
20/0 in the fourth quarter versus more normalized growth of 4-50/0. would generate $780 million extra
profits. Morgan Stanley expects 2002 to remain challenging with a
potential upturn in the economy lying ahead in the back half of the year. The following are criteria which
the Company uses in acquiring new brands or companies: they must be unique business
opportunities that complement . or an additional $2.S.S. Prestige Beauty sales in U.
.

The company has taken
excess inventories into account in its production forecast and shipped
at rates less than those of consumption. Morgan
Stanley believes proactive management should bode well for cash flow
and could be a catalyst for Estee Lauder shares. after cutting that recently from 2-30/0. recession. Morgan Stanley has
•
lowered their estimate of Estee Lauder's sales growth for fiscal 2002
to 1-20/0. Surplus products should work
their way through the supply chain with the next two quarters. Because Estee Lauder derives about 40% of
its sales and operating profit internationally. To counter
exposure to global markets.8
Investment Risks
. its results are susceptible
to any recession overseas or weakness in currencies. Morgan
Stanley's EPS estimates also reflect expected pressure on margins and
a more tempered outlook for travel retail in Europe and Japan. they
expect.S. and especially effects on U. doubts about consumer confidence
and spending. and 7%.S. this
business accounts for 5-6% of sales. Estee Lauder's'EPS face
pressure from the U.
•
Foreign-exchange factors. Estee Lauder enters into forward-
. though they do not
expect this to emerge until calendar 2002. and U. sales.The Estee Lauder Companies face three key investment risks:
•
Susceptibility to economic downturns. 4%.S. retailers' contraction of inventories. In response to slowing
economies.

90/0 of the voting power of the
..
.
---
--.....000 points-of-sale globally..
~
exchange contracts to hedge purchases....... upscale perfumeries
and pharmacies and.. freestanding company stores and spas.
... The Estee Lauder
Companies created a new division. ELC Online.... which should in turn generate superior margins. in-flight and duty free shops in airports and cities...
. 2002.... specialty retailers.. the
Estee Lauder Companies said it won a lawsuit that addressed questions about advertising
in cyberspace. and owns 90. to a lesser extent....
.
.. The public float
. Morgan Stanley believes that because
of Estee Lauder Companies exclusive distribution.
.... The Lauder family has controlled Estee Lauder
since its founding.... stores on
cruise ships.
totals 105 million Class .
.
.
.
..... receivables....... or 440/0 of the total common stock
'W'
outstanding. in the Spring of 1999 (3). the perceived quality of its bran9-s
should heighten... and payables in-
•
Limited public float.
. Its range of brands covers
strategically different niche markets.A shares... responsible for all online strategies and
activities for all brands..
.
•
foreign currencies .. They
primarily consist of upscale department stores. the
Company also began to sell certain of its products over the Internet.
.... Estee Lauder sells and markets its
products at more than 9.
common stock and 53...
.
. minimizing cannibalization of brand share. On March 15.
...
....70/0 of the shares outstanding... The New York cosmetics company said that Germany's District Court of
..
. In November 1998..
..
--
Operational Strategies
The Company sells its products basically through limited distribution channels to
complement the images associated with its brands.
'W
~
9
..

a unit of
Excite@home Corp. federal court in
New York. and said '~he did know
what effect the nlling could have on Estee's U. It said the court also ordered
iBeauty. alleging trademark infringement. unfair competition and false advertising. Estee Lauder
has filed similar suits against iBeauty and Excite in France and in U. formerly named Fragrance Counter Inc. (11). based in Redwood City. and iBeauty to stop using certain Estee
Lauder trademarks as keywords to trigger banner ads on Web sites. an analyst for Jupiter Communications in New York. Clinique. said the case
"has major implications for many sites across the Web". "is
at least a flrst precedent out there in cyberspace related to this type of conflict. said they had not reviewed
the ruling with their German trademark lawyers. case".10
Hamburg ordered Internet companies Excite Inc. California. to stop shipping products not sold by ." Representatives of Excite. since keyword-based ads
generate hundreds of millions of dollars in revenue.
.. but that the company reserves the right
to appeaL Drew Ianni.
authorized Estee Lauder retailers to Germany from the U. He said the German decision. since
iBeauty does not ship these products internationally. and said it expects rulings in those cases soon. and
Origins as keywords amounted to unfair competition under Germany law.S.S. Estee
Lauder filed the German suit in January 1999. false
representation. An iBeauty representative said
the German court's ruling "will have little to no effect on iBeauty's business. Estee said the court
decided that Excite's sale to iBeauty of the trademarks Estee Lauder. He said Germany is known for
"having strict laws that tend to favor trademark corporations".S.

com
and revamp its Internet strategy. In addition.
. 11
Supply-Chain Management
. on which consumers can buy a range of Estee Lauder beauty products
:.... they expect the launch of new material-requirement planning.. The move would make Estee Lauder the second business
.. The moves include reconfiguring the global brand structure.... associated carrying costs.
The Estee Lauder Companies initiatives to streamline supply-chain management
and enhance working capital bode well for process-led growth in the long term.
...
..--
...... along with better sales forecasting procedures..
the 'deal would have no impact on its earnings..
..
.......
.com and MacCosmetics.....com.
.. Terms were not disclosed.
... and closing underperforming brand-name shops in
..
..... Morgan
Stanley believes.. In fiscal 2003..
Internet Strategy
The Estee Lauder Con1panies recently announced that it would buy Gloss.
The company projects total savings from inventory cuts...
...
... but Estee Lauder says
....
stores..
reevaluating supply-chain systems. it will incorporate all of its brands
. The
.com. should enable Estee Lauder
'W'
. it will launch two more branded sites...
new systems..
..... transportation and distribution
optimization.. and quality procurement and manufacturing activities at $90-110 million in
the next three years (7).....
.
.
... Estee Lauder says it plans to implement a
--
three-pronged strategy.....
into Gloss.. Finally.
.. It says it will protect its brand by developing modules on sites
..... and obsolescence write-offs ..-
....
to improve inventory reductions....
EsteeLauder.
(8) .
'W'
that already sell its products.
to absorb a beauty-oriented pure-play.
.
"-
..

. She will also make personal appearances around the world on
behalf of Estee Lauder. In this new
dual image. 2001. Chairman of The Estee Lauder Companies Inc. Elizabeth Hurley will continue to appear in ads for the very
lucrative fragrance lines. Straw will oversee the corporate senior vice
presidents heading Estee Lauder's manufacturing. Carolyn Murphy will promote the makeup. Straw will help the New York-based company manage its complex
web of distribution outlets. "Elizabeth and
C~rolyn
complement each other perfectly in both
personality and natural beauty". Former
executive for Compaq. In his new job. new brands and expanded
distribution. skincare and spa products plus
the free standing stores.
On September 6. Leonard Lauder. "As the Estee Lauder Companies
increases its global presence with innovative products.
said of the global plan.
. there has been an addition to the Estee Lauder Companies. The new Estee Lauder dual global image maximizes the
combined beauty and potential of Elizabeth Hurley's captivating persona and Carolyn
Murphy's classic American style to convey the unique messages of the brand to
consumers worldwide (1). Edward Straw is the new president of operations for the Estee
Lauder Companies. information
systems. American supermodel Carolyn Murphy joined British
actress and producer Elizabeth Hurley as spokesmodels for Estee Lauder." said the president and chief executive Fred Langhammer (10).12
Company Addition
Recently. packaging and quality assurance areas. research and development. the skill and efficiencies of our operating units become increasingly
important to our success.

the Estee Lauder Companies announced that Jim Nevins
would become a senior member of the team leading the conceptual brand renewal process
for the Estee Lauder brand.
"He is a creative visionary who will work closely with the Estee Lauder leadership group
and me as we continue to redefine luxury and aspiration in contemporary terms" (15). biologists. Therefore. it is nunlber one in prestige..13
Brand Equity
Building brand equity is one of the fundamentals the Company was built on. microbiologists and physicists are currently on staff. their product safety testing
requires a collaboration of experts across several sciences. the company
believes this will continue to make their aggressive marketing programs a success. From Estee Lauder's core brands to its newer brands. is committed to
~~Bringing
the Best to Everyone We Touch"
(5). Consumer safety has always been top
priority at the Estee Lauder Companies Inc. To ensure the
safety of all products brought to market by the Estee Lauder Companies Inc.
"Clearly.
On November 30 th of last year.
Innovation/Social Responsibility
The Company has been at the forefront of technology over the years by virtue of
its investment in Research and Development.
The Company invests heavily in aggressive. Each
individual brand has a single global image in advertising and merchandising presentation. Jim has a strong track record in marketing and brand building. Approximately 395 leading
chemists. Due to this new personnel development. Bousquet-Chavanne said. and a deep
understanding of the retail business on a worldwide basis. well-funded marketing programs. The
Estee Lauder Companies Inc." Mr.
formulations and their packaging must exceed the high Company standards for ingredient
.

~
.
.
.. Japan..
.
... All Estee Lauder
Companies Inc.
"Wt
.... and
..
~
14
preservation and stability. and package compatibility... The President of
Operations establishes their environmental and safety philosophy..
.
. New York..
Oevel..
.. All operations and facilities are dedicated to excellence
.. Markham. who directs the activities of the
Department of Environmental Affairs & Safety and the Facility Managers/Subsidiary
VP's. using biological assays and
human volunteers. is also highly committed to maintaining a safe
'W
. product efficacy. The
Company's commitment to excellence begins at the top.
developed at Research and Development within the previous three years.. The Chief Executive Officer and
the Corporate Environmental Committee.
Companies' Research and Development facilities are located in Melville..
and healthy work place for all employees.
.... and to protect the environment and the
communities in which they operate through continued responsible action.
safe.. and Blaine. They are proud of the enviable safety record the
Estee Lauder Companies Inc...
Safe Environment
The Estee Lauder Companies Inc... Generally.
. one-third of the Company's sales volume in a year comes from products
. The success of the Company's environmental and safety programs is a result of the
commitment of its employees.. This is executed
through the Senior Vice-President of Global Operations.
... Ontario. Minnesota (12) . nor do they ask others to
conduct animal testing on their behalf.
.
.... comprised of senior level executives from all
~
areas of the Company. They do not test their products on animals. products are tested for irritancJ and allergy.. has sustained since their Company was founded in 1946
and their continued commitment to producing quality products that are clean.
-..
. pure. Estee Lauder
. Tokyo.... Belgium. provide overall guidance and direction.

..
.
15
and to continuous improvement through implementation of environmental and safety
initiatives.
-.
.. and its officers... manufactured. production.. where products are developed... reuse.
.
-..
.
~
.... and
.
-
To provide support to all organizational units via the Company's
•
To encourage and apply pollution prevention.
Equal Opportunity Employment
It is the policy and practice of the Estee Lauder Companies Inc. age.. sex....
w
.. and distribution .....
.
•
To promote responsible environmental and safety practices..
'w
•
To strive to continuously improve their environmental and safety
management systems and practices. This includes an annual review of
objectives and targets. enhancing
awareness among their employees and the communities in which they
~
operate.
•
Environmental Affairs & Safety department.
...... and recycling practices ..
. religion. resource conservation.
. color.... This will promote employee
safety and mirumize environmental impact throughout their products'
-... waste
minimization... national
.
•
To minimize waste disposal costs and promote application of safe and
innovative technologies for waste disposal..
..... The Company has set specific objectives to meet these commitments (14):
•
To meet or exceed all requirements of applicable environmental...
..
and distributed . to
ensure equal opportunities without regard to race.
..
development...
safety laws and regulations.
.."
.. health....

disabled veterans and Vietnam-era veterans.
•
Ensure that all personnel actions. transfers. benefits. company sponsored training. and social and
recreational programs are administered in accordance with the principles of
equalopponxullty. The
above-stated policy and Affirmative Action Plan confirm the Company's commitment to
(6):
•
Recruit. handicap. hire. train and promote in accordance with the principles of equal
employment opportunity. disabled veteran or Vietnam-era veteran status. they work to preserve the
. education.16
origin.and
•
Reaffirm its policy to provide equal employment opportunities to qualified
handicapped persons. the environment and the arts. tuition assistance. the corporate philanthropy program and community involvement
initiatives have supported the activities and growth of numerous organizations dedicated
to health and human services.
Philanthropy
Over the years.
terminations. citizenship status. The Company
stri ves to be responsible citizens in every community they serve: their corporate fund
drives help sustain local public schools and needy charities. and to
affirmatively seek to advance the principles of equal employment opportunity to ensure
that there is equality of opportunity in all terms and conditions of employment.
•
Ensure that promotion decisions comply with the principles of equal
employment opportunity. including compensation.

more than $31.000 has been raised by the Foundation.
Corporate Contributions
The Estee Lauder Companies make corporate contributions each and every year.
As part of their strategy to maximize the effectiveness and sustained impact of their
. Lauder. The "Pink Ribbon" Breast
Cancer Awareness Program is now globally recognized as the symbol of breast health." In 1993. fifteen'ofwhich have
officially designated a month to Breast Cancer Awareness.000. In addition.initiated by Estee
Lauder U. Mrs. On June 8. CNN's "Business Un-Usual" featured The Breast Cancer Research Foundation as
an exemplary organization in its work to combat breast cancer (5).
is their highly visible ~'Pink Ribbon" Breast Cancer Awareness Program
introduced in October 1992 to draw public attention to breast cancer and spread the
message to women that early detection certainly saves lives. established The Breast Cancer Research Foundation.
The Company's most significant philanthropic endeavor .17
environment through broad-based recycling programs. In the
millenium year the program was implemented in 43 countries.A. to fill critical gaps in medical research funding.
More than 17 million pink ribbons have been distributed at counters worldwide. a not-forprofit organization.S.200.
1999. Since its founding. and the activities
organized and supported by employees of the Estee Lauder Companies Inc.000 is
attributable to their collaborative fund raising endeavors with retailers. of which $4. 21 cities around
the world launched International Breast Cancer Awareness by joining them in their "'2000
Global Landmarks Illumination Initiative. Senior
Corporate Vice-President. Evelyn H. and they strongly endorse
employee volunteerism.

enthusiasm and talents to a number of causes: First
Step lob Readiness Program. Corporate Recycling Programs & Collection Drives.. Employees are heavily
encouraged to contribute their time... Lighthouse International. etc..
. Look Good .. Feel Better....
~
~
.... also sustains numerous volunteer endeavors that exemplify their commitment to "be
responsible citizens in every community we serve" (5). Dear Santa Holiday Program..
Employee Volunteerism
In conjunction with their corporate philanthropy.
Due to the Estee Lauder Companies Inc. the Estee Lauder Companies
Inc.. raffles.18
contribution dollars. does not reflect the many hundreds of institutions to which they
annually contribute in the millions of dollars through contributions of products..
. Operational
Strategies.
New York Cares Day.
... This.S.
. lHS
99....
.. Roberto Clemente HighSchool. 20..
. significant resources. and from the many
beneficiaries select a few to which they pledge long-term. Support/partnerships with other public
"..S.. they carefully screen the recipient institutions.
. however.-
auctions. Financial Development. Take Our Daughters to Work Day. for Business Careers..
Partnerships with Schools. See
Appendix B for a full list of the charities in which the Estee Lauder Companies are
involved. They would have been so successful hadn't they had a global marketing
..
.. The Murry Bergtraum H.. (5)..
. PS811X.
.
..
~
school related organizations..
'W'
. and
Corporate Drives/Collections (5) .. P. fundraisers.
Donations support women's "self-help" groups.
. Brand Equity and Innovation/Social Responsibility they have been in business
for 56 years....
".. charity benefit events..
'W'
.

.19
strategic plan and the drive of "Bringing the Best to Everyone We Touch" (5). I feel
confident that the company will continue its successfulness in the upcoming years.

The Netherlands. Nevv Zealand. Estee Lauder receives The Neiman Marcus Award for Distinguished
Service in the Field of Fashion
1963
Austrailia. is established
France opens
1965
Manufacturing facilities open in Oevel. Greece. the first bath oil to double as a
perfume
1957
Estee Lauder introduces Re-Nutriv
1958
Leonard Lauder joins the company
1960
Estee Lauder International operations begin. Estee Lauder Cleansing Oil. and Norway open
. Belgium.
New York City
1953
Estee Lauder introduces Youth Dew. Denmark and Hong Kong open
1962
Italy. Belgium.
Germany. Portugal and Sweden
open
1964
Ronald Lauder joins the Company
Aramis Inc. Markets open in the United
Kingdom (first account . Estee
Lauder All Purpose Creme and Skin Lotion
1947
The first deparment store account is established with Saks Fifth Avenue.Appendix A (2)
Company Chronology
1946
Joseph and Estee Lauder found Estee Lauder in New York City with four
Products: Estee Lauder Creme Pack.Harrods in London)
Canada and Puerto Rico open
1961
Central America. Finland. Spain and Switzerland open
Golden Diamond Collection launches as the Company's first evening
makeup collection
Mrs.

K. Long Island
1968
Mrs.
Estee Lauder products become available for sale in perfumeries in
Moscow. Estee Lauder receives the Spirit of Achievement Award given by the
Albert Einstein College of Medicine of Yeshiva University
Clinique Laboratories. Leningrad and Kiev
Aramis introduces JHL
1982
Estee Lauder introduces Night Repair Cellular Recovery Complex
1984
Aramis introduces Tuscany fragrance
1985
Mrs. the first superperfume is founded
1970
Aramis 900: Scientifically formulated. fragrance free.1966
Austria. ESTEE: A Success Story. Japan. U. Inc. Estee Lauder's autobiography. is published
. Estee Lauder is named one of ten Outstanding Women in Business in
The United States by business and financial editors
The Whitman Plant opens in the United Kingdom
The Estee Lauder Melville Plant opens in Melville. problem-solving
products for men are introduced
Melville Plant capacity is doubled. the first sports fragrance
1979
Prescripti ves is founded
1981
New expanded manufacturing facilities open in Petersfield. is founded
Estee. separate Research and Development
Laboratories
Mexico
1971
open~
The Melville plant receives an award from the American Institute of
Architects for notable design
Clinique introduces Aromatics fragrance
1972
Estee Lauder introduces Aliage. Singapore and Thailand open
1967
Mrs.

Estee Lauder introduces Beautiful fragrance
Prescriptives introduces Calyx fragrance
1986
Clinique is the first cosmetic company to be invited to exhibit at the
Academy of Ophthalmology convention
Aramis introduces the New West fragrance for him
1987
Estee Lauder introduces Eyzone Repair Gel
Aramis introduces Lab Series for Men
1990
Estee Lauder introduces Time Zone Moisture Recharging Complex
Prescriptives introduces Eyewear
Origins is founded
Origins introduces Starting Over. the first AHA product sold in
department stores
Origins launches Peace of Mind
1991
Estee Lauder introduces Advanced Night Repair Protective Recovery
Complex
Prescriptives introduces All Skins foundation
Origins opens its first freestanding store in Cambridge.. Massachusetts
. first chemical sunscreen-free sunblock for
daily protection
Astronauts us Clinique products on space shuttle
1992
Mrs.. Estee Lauder receives The Neiman Marcus Award for Distinguished
Service in the Field of Fashion..
Germany
Clinique launches City Block. making her the first person ever to be
twice honored with this award
Origins opens a freestanding store in SoHo. New York City
.
Origins International debuts in the KaDeWe department store in Berlin..

in Budapest. Florida
Estee Lauder Companies acquires a majority interest in MAC Cosmetics
(December 1994) and assumes distribution for MAC products outside the
U. called Palladio
Fragrances International.Origins launches at Nlagasin K in Copenhagen. with Herbert Frommen
. Spring Fever
Aramis launches "tommy" the first fragrance under license from Tommy
Hilfiger
1996
--
Origins launches store-with-a-store at Isetan in Tokyo. its first worldwide. Czech Republic
Clinique launches Cyberface
care and makeup
an interactive software program on skin
Clinique On Campus launches at Yale University
Clinique launches its first assisted-sell counter at Foley's Memorial City
Origins opens lOth freestanding store in Tampa. Estee Lauder is honored by the American Society of Perfumers with
their first Living Legend Award
The Skin Cancer Foundation presents the first annual Skin Sense A ward to
the Lauder family
Clinique opens a freestanding store. and Canada
Aramis introduces Havana in the United States
1995
Origins introduces its first fragrance. Japan
The Estee Lauder Companies establish a partnership.S. Denmark
Clinique's Turnaround Cream is the first face cream with salicylic acid
1994
l\1rs. celebrating forty years of popularity
Estee Lauder opens its first freestanding store in Prague.
Hungary
Clinique launches
Good" Campaign
~'Beauty
Isn't About Looking Young But Looking
Youth Dew receives the Fragrance Foundation's Fifi Award for Perennial
Success.

bobbi
Prescriptives introduces two new fast-acting makeup removers . a new reformulation of best-selling Advanced Night Repair.
Estee Lauder introduces Advanced Night Repair Whitening Recovery
Complex. three limited-edition
fragrances based on the original best-selling Estee Lauder pleasures
fragrance. acquires the remaining equity interest in
Make-Up Art Cosmetics (MAC) (2/98)
Bobbi Brown launches her first fragrance. Flirt
Tommy Hilfiger Toiletries launches Hilfiger Athletics
Tommy Hilfiger Toiletries open "tommy's shops" with the launch of 14
new body. sold exclusively in international markets
Estee Lauder introduces a skin care line for oily skin exclusively in
international markets: Clear Difference Purifying Cleansing Gel.. Clear
Difference Purifying Oil-Control Lotion and Clear Difference Pore
Cleansing Mask join Clear Difference Oil-Control Hydrator (launched
1997)
The Estee Lauder Companies Inc.Estee Lauder Body Smoother Exfoliating Cream is Best New Body
Product by the UK N ew Woman Beauty A wards
Estee Lauder introduces Re-Nutriv Intensive Lifting Series and Re-Nutriv
Intensive Lifting Eye Cream
. hair and face products." "tommy girl" and
Hilfiger Athletics fragrances
Lab Series for Men introduces Lift Off! Power Wash
Lab Series for men introduces U-Turn Age Defying Formula
For the first time in its history. Dazzling GOLD and
.Quick
Remover for Face Makeup and Quick Remover For Eye Makeup
Prescriptives launches a new women's fragrance. Estee Lauder launches two completely
different fragrances under one brand concept.
exclusively in Asia-Pacific markets
Estee Lauder introduces a garden of pleasures. The store-within-a-store concept allows
the new products to be sold alongside leading "tommy.

Spots and Wrinkles
Origins introduces Never A Dull Moment age-erasing skin polisher with
fruit enzymes. which became Origins number one product during the first
three months of the launch
Origins introduces Clearance Time to see less oil each day
Origins introduces Let's Circulate Salt rub soap.
respectively
Prescriptives launches Anywhere SPF 1S. the new age of sunscreen
lightweight enough to wear on bare skin. a creamier.
Clinique launches Sheer Matteness T -Zone Shine Control
. over moisturizer. the first line extension of
their highly successful Salt Rub franchise
Origins introduces Night-A-Mins Cream. Retinol for visible improvement of Lines.. more emollient
version of Night-A-Mins Lotion
Clinique launches in Brazil at Iguatemi Mall in Sao Paulo
Clinique wins "Top Brand" category in the UK Marie Claire Health &
Beauty Magazine Awards
Clinique's Dramatically Different Moisturizing Lotion wins "Top
Product" category in the UK Marie Claire Health & Beauty Magazine
Awards
Clinique launches City Cover Compact Concealer SPF 1S
Clinique Happy Fragrance expands with Body Wash and Body Smoother
Clinique launches Superlast Cream Lipstick
Clinique launches Smooth Delivery Body Treatment.SILVER capture the feeling of celebration and spending time with the
people you love
According to the 1998 NPD Report. Estee Lauder pleasures and Beautiful
were the number one and two prestige fragrances for calendar year 1997. even over
makeup
Prescriptives launches LSW. a body moisturizer
and exfoliator in one
.

Clinique launches e-commerce site at www.clinique. a leading Englishlanguage beauty magazine
Estee Lauder Futurist Makeup won German Cosmopolitan's Prix de
Beaute and in AustrailiaClear Difference Oil Control Hydrator won the
New Women Beauty Award for "Best Skincare Product"
Lauder introduces Pure Color Nail Lacquer.
In addition to being presented with 10 other "Best of Beauty Awards". becoming the first
prestige cosmetic brand to sell its entire line of cosmetics over the Internet
The Fragrance Foundation awards Clinique Happy "Fragrance Star of the
Year" "Best Women's Fragrance in Specialty or Department Stores"
Allure Magazine awards Clinique top "Best of Beauty Award" for 1998. in France
Estee Lauder launches 1000/0 Time Release Moisture Cream and Lotion
. Spain's Telva Beauty Award for "Best Facial
Skincare Product".
Clinique's 3-Step System was inducted into the 1st Annual Allure Hall of
Fame. Norway's Tique magazine nomination for "Best
Skincare Product of-1998". Diminish also
wins Australia's distinguished New Woman Beauty Award for "Best AntiAging Product of the Year". which honors beauty's '"Gold Standards"
Clinique conducts global landmark study on the relationship between
mothers and daughters
Clinique launches in Bulgaria
Estee Lauder International opens freestanding stores in Morocco and
Bulgaria
Estee Lauder Diminish Anti-wrinkle Retinol Treatment is awarded the
French Marie Claire Prix d'Excellence award for Best New Skincare
Product.ircles was named "1998
Product of the Year" in Hong Kong by B-lnternational.com. an improved nail
formula in a ~"jewel" of a bottle. and placed first in the "'Face Care and
Treatment Category" in Switzerland's Annabelle magazine's Prix de
Beaute
Estee Lauder Uncircle Eye Treatment for Dark Circles and Self-Action
Sunless SuperTan recognized as best beauty products at 1998 CEW
Beauty Awards Luncheon
Estee LauderU ncircle Eye Treatment for Dark C. the first time a company won two years in a row.

The Oil
Absorbing Tonic and The Tonic
Tommy Hilfiger Toiletries introduces the tommy home fragrm1ce
collection. Country Place and Summer
. This is the first time Estee Lauder targets an ad campaign to a
more mature customer. Also. first transfer-resistant.
long-wearing lipstick in traditional lipstick case
In connection with an I8-month independent study on the impact of antioxidants when applied to skin. new skin care product for women in their 40s.MAX
blend. treatment
mascara in gold case
Estee Lauder launches Resilience Lift Face and Throat Creme and Lotion
SPF 15. The SU. Estee Lauder launches DayWear Protective
Anti-Oxidant Creme and Lotion SPF 15 with exclusive SU. a sensual fragrance that is offered
exclusively at Bergdorf Goodman and Neiman Marcus
La Mer introduces The Cleansing Lotion. Finelining Brush and Buff Brush
Prescriptives introduces 'Lavish Lipsticks' in 40 shades
.
. The collection of scented candles and fragrance room sprays is
available in three scents: Townhouse.Estee Lauder launches Indelible Lipstick Classic. after hours compact with
mood cover
Estee Lauder launches DoubleWear Stay-in-Place Concealer
Estee Lauder opens full-service.VI.
Soft Shadow Brush.
Prescriptives introduces four new makeup brushes: Foundation Brush. state-of-the-art day spa at Bloomingdale's
59 th Street
Estee Lauder introduces pleasures Body Smoothing Spray
Estee Lauder introduces Soft Clean Rinse-Off Cleanser
Estee Lauder introduces Lash Luxe Conditioning Mascara.
Former Estee Lauder model Karen Graham is featured in Resilience Lift
advertising.
In a new campaign
Aramis introduces Aramis Gold.. 50s and beyond. The Cleansing Gel.VLMAX blend was found to reduce the appearance of new
lines and wrinkles by 23 %
Estee Lauder introduces Attitude Compact. it is the only time a former model is featured
.

600 people attended the opening party. Earth Goddess
MAC introduces three new mascara formulas
Sheer..Prescriptives reafflmls their reign as ~'The Foundation Authority" by
introducing Photochrome Compact Makeup. Both RuPaul and k.a store for makeup artists only
City
launches in New York
MAC introduces new packaging with the launch of the Fall 1999 color
story.in London Heathrow's Terminal 3
MAC adds three additional DFS locations in Asia DFS Sun Plaza in
Hong Kong. Peace of Mind
MAC launches its first partnered store location at Le Printemps in Paris
MAC adds an additional door in Germany at Beck in Munich
MAC launches its first door in Spain at EI Corte Ingles Castellana in
Madrid Approximately 1. lang traveled to Austrailia for the
opening events
MAC opens its first sh9P in an airport .
Origins launches Original Skin Pressed makeup with you-control-it
coverage.putting
merchandise on tables and out of caseline
. lackluster skin
Prescriptives develops new "2001" selling concept at retail. hosted
by RuPaul
MAC enters the Austrailian market at Grace Bros in Sydney and Myer in
Melbourne. an edible form of the nUInber
one Sensory Therapy product.d. a compact foundation that sweeps on like a second skin and
stays fresh-faced all day
Origins launches Peace of Mind Gumballs. stressed skinbrightens overtired. DFS Saipan. full
coverage. Natural and Xtra
MAC introduces four Brow Pencils and Brow Set
. the
light-adjusting. and DFS Millennia in Singapore
MAC PRO Store . transfer-resistant cream foundation in the industry and the fIrst
patent pending Ergonomic Sponge
Prescriptives introduces Vibrant-Vitamin Infuser for dull.

luxurious hydrating spray
Clinique's All About Eyes is awarded "Best Skin Care 'Product in Limited
Distribution" by Cosmetic Executive Women (CEW)
Clinique Happy is awarded the American Marketing Association's
"Edison Best New Products Award" as one of the best new products of
1998 in the Women's Fragrance Category
Origins expands its strategy of creating a General Store by introducing
two products designed for the home. as well as shop on-line
Origins unveils its newest concept for total well-being at the NorthPark
Center in Dallas. Isetan on Scotts Road
Estee Lauder launches Pure Color Nail Lacquer in international markets
. a
Tea Room and outdoor Garden in the same location
Origins opens its first freestanding stores in Brighton. shopping experience that also features a Feel-Good
Spa with a unique spa-experience called "100 Minutes of Pure Heaven".600 square foot. Beach Blanket SPF 15 with no
chemical sunscreen and Cover Your Mouth Lip protector with SPF 8
Origins introduces Origins For the Bath. Taiwan
Origins opens the Singapore market at one of the country's premier
retailers. England and
Tienmu. The key
product in the line is Bare Hugs Baby massage cream
Origins introduces As Good As It Gets Foundation/concealer/finishing
powder in one
Origins launches two new sun products. a lightly fragranced. child-safe essential oils to soothe and comfort babies. The new flagship store is a 2. '
multi-dimensional. Texas.that absorb sebum and draw excess moisture away from skin for
immediate evaporation
Clinique Happy Fragrance expands with the introduction of Happy
Hydrating Mist. a line of 36 bath and body
products that deal with emotional as well as physical well-being
Origins launches its own Website with interactive activities designed to
cope with and reduce stress. Knock on Wood Wood Therapy
cream and Cleaning Service Nature's Household Cleaner
Origins launches its Baby line with seven products formulated with
calming.

a new fragrance available in the United
States
.
.....
Estee Lauder extends its Futurist franchise with the launch of Futurist Full
Treatment Eye Makeup and Futurist Lash-Extending Mascara
...S...
Estee Lauder unveils Idealist
w
...
.
Neiman Marcus and Holt Renfrew
Bobbi Brown launches in the Middle East
th
... Russia and Athens.
'-
..
.
..
.
...
... flagship store in New York City's Flatiron Building
DKNY For Men launches in all international markets
Creme de la Mer launches in Benelux.
..
~
a first of its kind non-acid skin refmisher
Estee Lauder introduces the WhiteLight Brightening System in Asia ...
..
'tIr
..
So
2001
MAC opens its first locations in Moscow.a five-product collection which combines skin care benefits
with aromachology
.. So Moist and So Clean
....
th
Estee Lauder celebrates Beautiful's 15 Anniversary with three new body
products and new print and television advertisements
.
Estee Lauder makes its first foray into the European body line market with
Body Power .
Estee Lauder introduces three new fonnulas in the mask category
Polished.......
Estee Lauder launches Go Pout Lipcolor ..........
.ten new shades offering
dimensional color in a blue enamel case
....
..........
Jo Malone opens U.....
...... a skin care collection in Bergdorf Goodman...
.
...
. European and
American Research & Development
. Greece
Bobbi Brown launches Extra.
. Nordic and Argentina
Prescriptives launches Luxe Soft Glow Moisture Makeup in all
international markets
.
--.
.
.......a
five-product line created by a collaboration between Asian......
Bobbi Brown celebrates the 10 anniversary of her business
~
Jo Malone introduces Red Roses..

eyes and cheeks. United State Balancing Tonic and Balanced
Diet Lightweight moisture cream
-
Origins initiates phase II of the re-launch of its color collection with 42
new shades for lips. as well as ten new
blush shades and 22 new eyeshadow shades (7)
. The Century City
location is the largest Origins store in the world and boasts a Zen Garden
Origins updates its skin care collection with five new products for all skin
types: Grin from Year to Year Brightening face firmer. Calm Balm Sensitive skin eye cream. Look Alive
Vitality moisture cream. Checks and
Balances Frothy face wash.Origins adds two key retail stores: one in the historic Flatiron Building in
New York City and another in Century City. California. The second phase introduces Liquid
Lip Color (nine shades) and Transforming Lip Glaze.

Inc.Appendix B (5)
Charities
•
The Breast Cancer Foundation
•
The Coalition for the Homeless' First Step Job Readiness Program
(which in 1997. for their corporate philanthropy)
•
New York Cares
•
Pencil.1999 and 2001 honored The Estee Lauder
Companies Inc.
•
Materials for the Arts
•
American Cancer Society
•
March of Dimes
•
City of Hope
•
Lighthouse International
•
Mount Sinai Medical Center
•
Memorial Sloan-Kettering Cancer Center
•
The Momentum AIDS Project
•
Kips Bay Boys & Girls Club
•
Girl Scout Counsel of Greater New York
•
The Museum of Modem Art
•
Whitney Museum of American Art
•
American Museum of Natural History
.